Country overview

#2
United Kingdom

Country stats

Rating Points
441
This indicator describes the overall rating of a given jurisdiction on several parameters according to cryptocurrency operations - market volume, crypto regulation, business climate, taxation framework.
Crypto Penetration
5.5%
Estimated percentage of crypto users out of the country's total population based on public data.
Legal Entities
42
Number of crypto companies registered in the country based on regulator data if available or other types of public data.
Regulation Points
140
An overall assessment of the granularity of crypto regulation in a given country. A high score is also given to countries where cryptocurrency transactions are highly regulated.
Amount of crypto users
3 701 500
Total amount of crypto users out of the country's total population based on public data.
Taxation points
9
This figure, according to our analysts' calculations, indicates the overall level of tax burden for cryptocurrency transactions in a given country. The higher the indicator, the lower the burden.
Market volume points
191.3
A rough estimate of this jurisdiction's retail crypto market relative to the rest of the world. The higher the indicator, the higher the market potential.
Status of crypto
Legally allowed
General status of cryptocurrency regulation in this jurisdiction.
Crypto payments
Legally allowed
The legal status of cryptocurrency payments for goods and services in a given country based on information from regulators, public data and feedback from our community.
Security Level
Minor danger
The overall level of security in a given country based on open data.
Crypto Salaries
Legally allowed
The legal status of cryptocurrency salaries to employers in a given country based on information from regulators, public data and feedback from our community.
Business Climate
Medium
Overall assessment of the friendliness of this country for crypto-business. This indicator takes into account the cost of obtaining a license and the attitude towards crypto entities in the country.
Stablecoin Regulation
Complete
This indicator is evaluating the regulation of stablecoins in a given country. Complex regulation means that it is possible to issue steiblcoins and obtain a license for this activity. Basic regulation means that the issuance of stablecoins is possible, but not all legal aspects are defined in the law. Standard regulation means that there is a legal practice of steylcoin circulation in a given country.
Bad Factors
No
This section describes the unfavorable economic factors for crypto-business in a given country. These are countries that are under sanctions or on the FATF grey list and other factors.
Types of licenses
Crypto-to-crypto
This license type allows VASP to provide legal exchange from one cryptocurrency to another.
Crypto-to-fiat
This type of license regulates the exchange from cryptocurrency to fiat.
Wallet/Custody
This country has a legal licensing procedure for companies that store cryptocurrency - - crypto wallet providers and custodians.
Stablecoin issuer
This indicator means that a special license/license is required to issue stablecoins in this jurisdiction, and the procedure for obtaining it is specified in the legislation.
Good
Medium
Bad
intro

For years, Britain has stayed a global fintech hub. Even offshores as a natural economic and financial phenomenon are a British invention. No wonder the United Kingdom has a complicated crypto regulation framework.

Security level
Crypto Payments

There is no law regulating crypto payments in the UK. According to HMRC, cryptocurrency is classified (4) as digital or ‘crypto assets,’ subject to capital gains or income tax, depending on the case. HMRC assumes that it can be converted into GBP by payments.

‍Some UK companies accept Bitcoin Payments, like SCAN UK (5) and Autocoincars (6)

Crypto Salaries

According to HMRC (7), crypto assets received as employment income count as ‘money’s worth’ in EIM00530 (8) and are subject to Income Tax and National Insurance contributions on the asset's value.

An employee may benefit from their employment by receiving a benefit that does not take the form of money. Such profits are often called benefits in kind. Some benefits in kind count as earnings within section 62 ITEPA 2003. Others may be treated as earnings under the benefits code (9). In most cases, the benefits code only applies to benefits that are not otherwise chargeable to tax. So, if a benefit is fully taxable as earnings under section 62 (because it represents money’s worth - see below), the benefits code will not apply.

You may also check some details about this case in the official FAQ (10).

Legal

The FCA is the leading licensing authority for crypto entities operating in the country. According to Cointelegraph (11), in 2022, the amount of crypto companies has dropped to 5 five operating under the TTR regime and 33 licensed by FCA. Currently, 41 companies with FCA registration are on the list of registered companies (12).

Details about crypto regulations history

As a global fintech hub, the U.K. has been a popular jurisdiction for crypto companies since 2017-2018. There was a light regulatory regime with the ability to operate without an FCA license. Over time, the regulation was tightened - it became mandatory to have a permit. In December 2020, The Financial Conduct Authority (FCA) established a Temporary Registration Regime (13) to allow existing cryptoasset firms who have applied to be registered with the FCA to continue trading. A total of 106 firms applied (14) to the TRR.

2018 HM Treasury, the Financial Conduct Authority (FCA), and the Bank of England created a crypto assets task force (15). In 2022, the U.K. government has declared (16) its goal to create a global crypto hub in the country.

FCA’s guidance CP19/3 (17), PS 19/22 (18), and HMRC crypto assets manual (19) lay out the different market participants in the crypto-asset ecosystem and the kinds of activities that will be regulated and recognizes three broad categories of crypto-assets: e-money, security, and unregulated tokens. Still, there is a clear regulation framework only for FCA-licensed companies (exchanges, custodian wallets). Utility tokens, ICOs, and DeFi are regulated only case by case (20). There is also no precise regulation for crypto funds.

The UK government website presents a short overview of crypto assets regulation in the country (21). It confirms that the FCA is the leading crypto regulator in the country and is responsible for licensing crypto activities.

Quote

The Financial Conduct Authority (FCA) is the UK’s main financial regulatory body. The FCA regulates financial firms providing services to consumers and maintains the integrity of the financial markets in the United Kingdom. It focuses on the regulation of conduct by both retail and wholesale financial services firms.

Here (22) is the detailed guide from the FCA on which firms need to register (or get a license). According to consulting firm Rue.ee (23), FCA registration is required for the following types of companies:

Exchange from cryptocurrencies to fiat money and vice versa

Exchange from cryptocurrency to cryptocurrency

Crypto ATM operations

Provision of custodian wallet services

Facilitation of peer-to-peer exchange of crypto

According to PWC, the FCA prohibits (24) the sale, marketing, and distribution of crypto-derivatives (excluding security tokens) to retail consumers.

tagRegulator
#cryptotocryptoFCA
#cryptotofiatFCA
#walletFCA
#ATMoperatorFCA
Taxation

Crypto taxation in the UK is regulated by HMRC - the UK's tax, payments, and customs authority. More information about crypto taxation is in the Koinly guide (25) and Unbiased (26).

Tax nameIndex
PIT tax Max45
PIT tax Min0
Max Individual CGT tax (for crypto)20
Min Individual CGT (for crypto)10
Corporate tax (CIT)25
Wealth tax Max0
Wealth tax Min0
PIT tax

According to Koinly (27), the personal income tax rate applied for crypto is 0-45%. Traders pay income tax on gains and losses over capital gains tax. In addition to the above, businesses will also pay corporation taxes, corporation taxes on chargeable gains, and VAT.

The UK also has a particular procedure for DeFi taxation (38) where PIT is applied.

CGT tax

According to the UK government's official website (29):

“You might need to pay Capital Gains Tax when you:

Capital gain tax - 10% for funds lower than 52,730 GPB and 20% - higher.

CIT tax

Most crypto entities pay an introductory corporate income tax rate of 25%. You may check the HMRC guide for business crypto transactions here (32) and in the HMRC business income manual (30) and HMRC crypto assets manual (31). Also, more details in the Koinly tax guide (35).

Links

1)Numbeo crime rating. Statistics

2)Homicide level. The list of countries by UNODC homicide rate.

3)Firearm-related death. Historical list of countries by firearm-related death rate

4)Is Cryptocurrency Legal In The UK? All You Need To Know. Article

5)SCAN UK. What is Bitcoin? Article

6)10 Steps on How to Buy a Car with Cryptocurrency. Article

7 and 8)EIM00530 - Employment income: benefits in kind taxable as earnings, meaning 'money's worth.’

9) EIM00513 - Employment income: general earnings: amounts treated as earnings. Government Manual

10)British government manual

13) The number of UK crypto firms operating under FCA temporary registration status drops. Article

14)Registered Cryptoasset firms

15)Temporary Registration Regime. FCA has established a temporary registration regime for cryptoasset businesses. Article

16)Economic Crime: responses to the Committee’s Eleventh Report. PDF-file

17)Cryptoassets Taskforce: final report. PDF-file

18)With New Prime Minister, UK Still Wants to Be Crypto Hub: Treasury Official. Article

19)FCA’s guidance CP19/3

20) FCA’s guidance PS 19/2

21 and 30) Cryptoassets Manual

22)What are ICOs? Article

23)Factsheet: cryptoassets technical. Article

24)Cryptoassets: AML / CTF regime - Registering with the FCA

25)CRYPTO LICENSE IN THE UK. Article

26)PwC Global Crypto Regulation Report 2023. PDF-file

26 and 29)Koinly guide. Crypto Tax UK: Ultimate Guide 2023

28)UK cryptocurrency tax guide: everything you need to know. Article

31)UK government's official website

32 and 33)Business Income Manual. Article

34)Cryptoassets Manual

35)Crypto Tax UK: Ultimate Guide 2023. Article

36)Tax Talk: Salary as cryptocurrency – what it means for employers and employees. Article